The sharp decline in stock market indices through the first eleven
months of 2008 has shaved over $5.0 trillion off the equity market
capitalization of companies in the S&P 500. The falling market
valuations reflect both a reduced appetite for risk and an expectation
that corporate cash flows will be pressured as the global economy
enters a recession of unknown depth and duration.

For auditors and financial statement preparers, the bear market
suggests that the goodwill reported on many corporate balance sheets
may be impaired. The accounting for goodwill, the amount paid in
excess of net identifiable assets in previous acquisitions, is set
forth in SFAS 142, Goodwill and Intangible Assets. SFAS 142 provides
for an annual impairment test for goodwill, rather than systematic
amortization as under prior guidance. The two-step impairment test
starts with a comparison of the reporting unit’s fair value to carrying
value. Impairment is indicated if the fair value of the reporting unit
is less than carrying value. Step 2 of the impairment test involves
quantifying the amount of impairment by determining the implied fair
value of the reporting unit’s goodwill. ...

... Regardless of a company’s regular annual testing date, SFAS 142
prescribes an interim test upon occurrence of an event or change in
circumstances that would more likely than not reduce the fair value of
the reporting unit below its carrying amount. In our practice, we are
observing many audit firms that regard the sharp decline in stock
prices and the general economic uncertainty to be triggering events for
an interim impairment test.